Party in Power and Currency Exchange Rates

Are there predictable dollar exchange rate trends according to which U.S. political party is in power? In their March 2024 paper entitled “Presidential Cycles and Exchange Rates”, Pasquale Della Corte and Hsuan Fu investigate whether the party holding the U.S. presidency predicts the dollar exchange rate. Their presidential cycle starts in November with a presidential election and ends four years later at the end of October. They express all exchange rates in U.S. dollars per unit of foreign currency. They consider currencies of countries with developed and emerging economies, making adjustments for introduction of the euro in January 1999, starting with nine currencies in 1983 and ending with 20 currencies. They relate findings to differences in country interest rates and inflation rates and to shifts in trade policy (tariffs). Using end-of-month dollar exchange rates for the selected currencies, global economic data and a measure of aggregate global trade restrictions during October 1983 through January 2024, they find that:

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